CPAR Reviewer
Accountancy (Bsa1)
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Test Bank – Law 2
Partnership and Corporation
CPAR
1. Which of the following is not considered a legitimate expense of a partnership?
A. Supplies used in the partners’ offices.
B. Salaries for management hired to run the business.
C. Depreciation on assets contributed to the partnership by the partners.
D. Interest paid to partners based on the amount of their invested capital.
2. If the partnership agreement does not specify how profit is to be allocated, profits or
losses should be allocated
A. Equally
B. In accordance with their capital contribution.
C. In proportion to the average of capital invested during the period.
D. Equitably so that partners are well compensated for their time and effort.
3. The most equitable distribution of partnership profits based on capital contributions uses
which of the following capital concept?
A. Equally
B. Average capital
C. Ending capital
D. Beginning capital
4. Periodic withdrawals by partners are best viewed as
A. Distribution of partnership assets to partners.
B. Expense of doing business.
C. Taxable income to the partners.
D. Payment of partners’ personal services to the partnership.
5. The division of partnership profits on the basis of salaries, interest and an agreed ratio is
usually necessary because
A. Most investors require this method of distribution.
B. This reflects the amount of time devoted to the partnership by the partners.
C. Partners seldom contribute time, effort and resources equally.
D. This prevents arguments among the partners.
6. A partner who contributes money or property as well as his work or industry to the
capital of the partnership is called
A. Industrial partner
B. Capitalist partner
C. Managing partner
D. Capitalist-industrial partner
7. The effect of the admission of a new partner is
A. To increase the capital balances of the original partners.
B. To increase the capital balances of the original partners.
C. Impossible to determine from the information given.
D. To have no effect on the capital balances of the original partners.
8. When a partner withdraws from a partnership taking assets that represent less than his
capital balances,
A. No bonus results.
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B. The remaining partners receive a bonus.
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C. The withdrawing partner receives a bonus.
D. The remaining partners owe the withdrawing partners the difference.
9. Which of the following will not result in dissolution of a partnership?
A. Incapacity of a partner.
B. Negative capital balance of a partner.
C. Bankruptcy of a partner.
D. Admission of a new partner.
10. Which of the following results in the dissolution of a partnership?
A. The winding up of the partnership and the distribution of remaining assets to the
partners.
B. The contribution of additional assets to the partnership by an existing partner.
C. The receipt of share by an existing partner.
D. The withdrawal of a partner from a partnership.
11. Which of the following does not result in the dissolution of a partnership?
A. Admission of a new partner.
B. Sale of partnership assets.
C. Withdrawal of a partner.
D. Death of a partner.
12. If a partner is insolvent, his personal properties shall first be distributed
A. To the partnership creditors.
B. To the partners by way of additional contribution when the assets of the partnership
were insufficient to settle all obligations.
C. To partnership and separate creditors in the ratio of their loan exposures.
D. To separate creditors.
13. In a partnership liquidation, the assets of the partnership shall be applied lastly to
A. Those owing to the partners with respect to their capital contributions.
B. Those owing to inside creditors in the form of loans or advances or business
expenses by the partners.
C. Those owing to outside creditors.
D. Those owing to the partners with respect to their share of the profits.
14. Which of the following statements is correct regarding a partner’s capital deficiency?
A. The partner should contribute to reduce the debit balance to the extent possible.
B. If contributions are not possible, the other partners with credit capital balances
will be allocated a portion of the debit balance.
C. Partners who absorb another’s capital deficiency have a legal claim against the
deficient partner.
D. All of these statements are correct.
15. In a liquidation, the liabilities of the partnership should be paid
A. Before any sale of assets.
B. Before the distribution of cash to partners.
C. Before the distribution of gains and losses on the disposal of assets.
D. After a revaluation of assets.
16. Claims against partners’ personal assets by creditors if the partnership can’t pay its debt
refers to
A. Unlimited liability
B. Mutual agency
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C. Dissolution
D. Liquidation
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17. A partner’s loss absorption balance is calculated by
A. Dividing the partner’s capital balance by his percentage interest in capital.
B. Multiplying distributable assets by the partner’s profit sharing percentage.
C. Dividing the partner’s total interests by his profit and loss sharing percentage.
D. Multiplying the partner’s total interests by his profit and loss sharing percentage.
18. The following is the priority sequence in which liquidation proceeds will be distributed
for a partnership
A. Partnership liabilities, partnership loans and partnership capital balances.
B. Partnership drawings, partnership liabilities, partnership loans and partnership capital
balances.
C. Partnership liabilities, partnership loans, partnership drawings and partnership
balances.
D. Partnership liabilities, partnership capital balances and partnership loans.
19. A liquidation differs from a dissolution in that liquidation
A. There may be an adjustment of partners’ capital accounts.
B. Assets maybe revalued.
C. The business will not continue.
D. Gains and losses are distributed according to the partnership agreement.
20. A limited partnership has A, as general partner, B as limited partner and C, as industrial
partner contributing P100,000, P50,000 and services respectively. The partnership failed
and after disposing all its assets to pay partnership debts, there still remains a note
payable in the sum of P30,000. Against whom can the creditor demand payment?
A
B
C
A. P30,000 P0
P0
B. P15,000 P0
P15,000
C. P15,000 P 7,500
P 7,500
D. P10,000 P10,000
P10,000
21. X, Y and Z form Y Partnership to engage in import-export business. The partners agrees
that the profit will be divided on the following ratio: X – 20%, Y- 30%, Z- 50%, but no
agreement as to losses. After one year of operation, there was a loss of P10,000. How will
you apportion this losses if the capital contributions are as follows: X – P20,000; YP15,000; Z – P5,000.
A. According to their capital contribution: X- P5,000; Y- P3,750; Z- P1,250.
B. Equally among X, Y and Z.
C. X – P2,000; Y – P3,000; Z – P5,000
D. A third party may be called to make the distribution.
22. R, S and T decided to form a universal partnership of all present property. The contract of
partnership was executed on October 10, 2009 but they commenced business on October
18, 2010. One of the following is not correct?
A. If the partnership is for 15 years, but one of the partners withdraws from the
partnership on the 12th year, the firm is dissolved.
B. The partnership began its existence on October 10, 2009.
C. If after the expiration of the its term, the partners continue to transact business, the
partnership is converted to a partnership at will.
D. In the absence of any partnership agreement specifically covering the division of
losses among the partners, they will be deemed to share the losses in accordance
with their capital contributions.
23. Partners A, B and C met a tragic accident. A and B instantly died on the spot, while C
0 a few hours
0 later. Who may wind up partnership
was brought to the hospital but died
affairs?